Things Novice Investors Need to Know About Trading on the Upper Circuit

Using different applications to invest in stocks has grown in popularity as a way to gain money, but novice investors sometimes make expensive errors, such as falling prey to the upper circuit’s traps. A lot of applications make it easier to open demat accounts, which enables users to make stock market investments. Experienced investors exercise prudence in the market, but novices may unintentionally make poor choices because they lack that expertise, especially when it comes to the upper circuit.

What is the upper circuit then? It shows the biggest percentage gain in a stock’s price within a single trading day. A stock’s trading is momentarily halted when it reaches its upper limit. This action is done to stop investors from purchasing stocks at inflated prices in the future since this might cause a bubble in the market. According to reports, this suspension aids in averting market disruptions and notable swings. These equities usually have a 45-minute to 1.5-hour pause to trading before it resumes.

Purchasing equities that are susceptible to the upper circuit carries some risk, however. Experts in the market advise being cautious since there’s a good chance the share price is being purposefully manipulated if a company often reaches the upper circuit. It is believed that promoters may acquire shares in order to set off an upper circuit, then promptly sell them when the price of the stock rises. Common investors are left in a vulnerable position with few ways out by this technique.

For instance, for the last several sessions, shares of GKP Printing and Packaging Limited have been trading close to its upper circuit limit of Rs 15.88 per share on the BSE. On Tuesday, the stock increased by 3% as well, reaching a high of Rs 15.48 a share. The stock of GKP Printing has dropped by over 30% in the last year. By December 2022, the stock had fallen to Rs 20 per share from its July 2022 trading high of over Rs 165.

Even if the upper circuit has advantages, there are significant dangers involved, particularly for investors who are ignorant of possible market manipulations. It acts as a warning to anyone considering investing in the stock market to proceed with care, carry out extensive research, and consult with knowledgeable experts in order to reduce the dangers involved.